Mortgage intermediaries will be charged a £4m levy towards the Financial Services Compensation Scheme (FSCS) for 2026/27.
The FSCS said the levy was £2m more than forecast in November and the higher charge was due to a lower opening balance for mortgage intermediaries and a higher-than-forecast compensation expenditure, which resulted in a larger deficit being carried forward.
Compensation costs for mortgage intermediaries are forecast to total £400,000, up from the FSCS’ forecast of £100,000 in November.
This is the first levy imposed on mortgage intermediaries since 2021/22.
Some 75% of the levy will be paid by advisers and the remaining 25% will be covered by home finance providers, representing a contribution of £1m.
The levy for general insurance distributors was unchanged, with no charge to this class. The FSCS said no new firm failures were expected, and claims would mostly relate to payment protection insurance (PPI) claims.
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A changing compensation landscape
The FSCS said the compensation environment was “evolving”, particularly around advice claims, such as a higher volume of lower-value general investment claims and fewer higher-value pensions and self-invested personal pension (SIPP) operator claims.
This has resulted in a projected annual levy of £247m, with anticipated compensation costs of £267m.
These costs are £27m and £95m lower than forecast in November respectively, with surpluses carried forward from the last year.
It said this aligned with its cost-efficiency approach.
The FSCS said it did not expect there would be a need for a retail pool levy to cover any shortfalls, as no financial services categories were expected to breach their annual levy limit.
Martyn Beauchamp, chief executive of the FSCS, said: “Over the past year, we delivered our statutory responsibilities efficiently, paying compensation and pursuing recoveries in a way that supports timely and fair outcomes for customers, while delivering value for levy payers.
“In 2025/26, we made close to 12,000 advice claims decisions, supported customers when three credit unions were declared in default, responded to one new insurance firm going out of business, and continued to support those customers impacted by earlier failures. Total recoveries in the past three years alone were £145m, delivered through disciplined, cost-effective recovery expertise that helps offset the levy.
“Alongside this strong performance, we set a clear direction for the future with the launch of our new five-year strategy. It sets out how we will build a more scalable and cost‑efficient claims service, strengthen our purpose‑driven culture and act as a responsible steward of the levy, ensuring FSCS continues to deliver for customers and industry in the years ahead.”
